Stop-loss and Target
Stop-loss and target orders are used in trading to limit the potential loss and gain in a trade.
A stop-loss order is an order placed with a broker to sell a security when it reaches a certain price, known as the stop-loss price. The purpose of a stop-loss is to limit the potential loss on a trade by automatically selling the security when it reaches a certain price.
A target order, also known as a take-profit order, is an order placed with a broker to buy or sell a security when it reaches a certain price, known as the target price. The purpose of a target order is to lock in profits on a trade by automatically selling the security when it reaches a certain price.
There are a few different ways to apply a stop-loss and target order while trading:
Manual: You can manually place stop-loss and target orders with your broker at the time of opening a trade.
Automated: Some trading platforms have built-in tools that allow you to automatically apply stop-loss and target orders based on a percentage of the trading price or a specific dollar amount.
Trailing stop-loss: This is a type of stop-loss order where the stop-loss price is not fixed, but rather is set at a certain percentage or dollar amount below the market price. This type of stop-loss order will move with the market price, so if the price increases, the stop-loss will also increase.
It's worth noting that, stop-loss and target orders are not guaranteed to be filled at the exact price specified, as there can be slippage in fast-moving markets. Also, stop-loss and target orders are subject to the broker's terms and conditions, and may not be available for all securities or in all markets.